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Tuesday, 12 August 2014

Please note: This piece was originally commissioned by the magazine MCD, and will be appearing in French in their December edition.

I use Dogecoin because
I’m emotionally drawn to the dog. Unlike the distant, fossil-like Queen on the
Pound banknote, the Shiba Inu is at once transcendent and approachable, self-contained
but cuddly, looking into my eyes with a sideways glance, as if it just noticed
me and is wondering whether I want to play or be left alone. It’s not an aggressive
dog, or for that matter, a bouncy dog trying to lick me. It has self-directed,
quirky soul, and it’s almost
impossible to imagine this dog being an asshole.

Some people in
the crypto-currency community have written Dogecoin off as a joke, or even a
scam. Maybe it’s both, but does this
matter? All currency in the final analysis is really a scam, and the real
question is which of those scams we want to agree to. I for one would rather
pledge allegiance to a mystical pooch than to worship the image of a redundant monarch.

Indeed, Dogecoin,
to me, is the best of all of the so-called ‘alt-coins’, the alternative crypto-currencies
that have emerged as offshoots from the original Bitcoin source-code. Here is
why.

Money isn’t ‘rational’

Run this
question through your brain: Why did
people invent pottery?

The response
from many people is ‘because it must have been useful to store food and water’,
an answer which chimes well with our prevailing rationalistic world view. Nevertheless, not only is the
assumption that pottery was explicitly ‘invented’ problematic, but evidence suggests that it was originally used to create
abstract religious
figurines. The details of such archaeological debates don't matter here - what matters is to realise that we often have an automatic bias towards thinking about history in terms of what we're used to in the present.

Why do I bring this up? I do so because there is a
similar problem among many economists who attempt to peddle ahistorical
narratives about ‘why people invented money’. Their story normally involves
people ‘rationally’ designing money as an alternative to ‘barter’. There is
very little immediately rational about exchanging real goods for pieces of
paper or shiny bits of metal though. Sure, once the social convention of
monetary exchange is set up, it’s useful,
but the imagined process in which bakers and butchers ‘invent’ money to deal
with the awkwardness of exchanging meat for sourdough loaves is an attempt to
reverse-engineer history from the perspective of present dogma.

Money is not an
object that can be invented. It is a social convention that has to be
culturally constructed. The use of monetary tokens only appears rational once
we’re party to a collective agreement (or delusion) to imbue those tokens with
value, and that collective agreement needs to be constantly maintained.

State power, local trust, meta-national mysticism and
labour

In the case of our
normal fiat currency, the collective agreement is given strength by the psychological
(and real) force of official authorities. Most of our fiat currency is created
by commercial banks, but derives much of its ‘reality’ from state endorsement
of its legal status.

In the absence
of a state championing a currency, you need other factors to induce collective
acceptance. For example, a very small community might be able to create and
maintain a local currency backed by nothing but the preexisting communal trust
network, woven together from mutual friendships, ties of honour and anxiety at facing
exclusion from the social group.

To create belief
in a non-national currency that is not located in a small community though, is
especially hard. Bitcoin provides a fascinating case study of the process. When
it first started, Bitcoin commanded almost no value. It had one crucial feature
though. At its heart was a mysterious, almost immaterial figure called Satoshi
Nakomoto, a focal point for a community to rally around.

The mystique of
Satoshi was vital, imbuing what was otherwise a clever but cold piece of
cryptography with a soul that people could believe in. Satoshi was the holy ghost
in the machine, and the act of mining resembled a ritualistic quest to build on
the blockchain started by the ghost. It’s through this process that the
imagined value of Bitcoin came to life, and started taking on a reality.

By contrast, imagine
if a well-known person, like Stephen Hawking, invented Bitcoin. It would be
devoid of all mystery, resembling a science project or a corporate product,
rather than an underground movement.
The specifics of Stephen’s personality would replace the cryptic symbol that
the Satoshi figure once stood for, and what would you have left? A clever piece
of cryptography, and a somewhat banal act of using up energy in running
computers.

That said, there
is something about the pointless nature of randomly churning algorithms through
a computer that is psychologically powerful. If you want to imagine that
something essentially ephemeral is a useful commodity, it helps if you expend
labour in creating it, because labour implies scarcity (you only need to work
for things that are scarce), and scarcity implies a potential for an exchange
value (if something is abundant there is no need to exchange anything for it).

The computing
power (‘labour’) put into the Bitcoin network does not create value in itself,
but is a further psychological backer to Bitcoin tokens’ imagined value. If they weren’t valuable we wouldn’t exert
all this labour would we, and because we exert this labour they must be
valuable, right?

The emergent myth of Bitcoin’s rationality

'WE WOULDN'T BUILD IT IF IT WASN'T VALUABLE... RIGHT?'

Interestingly,
as the ritualistic process of mining has become increasingly competitive, and
the commercialisation of Bitcoin has steamed ahead, new narratives have formed
to explain why Bitcoin tokens ‘rationally’ have value.

Chief among
these is the idea, touted
by the Bitcoin foundation itself, that bitcoins have value ‘because they
are useful’. It is part of a broader trend among the Bitcoin elite to rewrite
history and claim, in hindsight, that the value of Bitcoin was always
self-apparent, and that early adopters were just getting involved due to rational
future expectations of increasing societal recognition of Bitcoin’s use value
as a secure means of exchange.

In this
formulation, Bitcoin tokens derive their value by being part of a potentially
useful system, the value of each bitcoin reflecting the aggregate market
assessment of how useful it is to have a secure means of exchange. It’s kind of
like arguing that containers on train carriages derive the entirety of their value
from the usefulness of the rail network. The implicit narrative is this: Hey, these things are useful as transmitters
of value for exchange, so let’s compete over them, and in so doing create their
market value, which can now be used for exchange.

Circular no? There
may be a glimmer of truth in it, but it’s mostly an attempt to describe the
essentially emotional and social process of currency creation with the language
of cold individual rationality.

Tin-man currencies ain’t got no heart

This thinking
has subsequently influenced the way that a lot of alternative crypto-coins have
attempted to market themselves. Rather than embracing their own absurdity, many
alt-coins have marketed their efficiency, their security, or their application
to some specialist use case, as if the usefulness and competitiveness of the
design was the most important aspect of why a person accepts a currency.

The
crypto-conference has thus become the realm of ‘serious people’ discussing
‘serious business’, not wishy-washing mysticism and emotion. They appeal to
rational functionality, rather than inspiring
people to use them. They are techno-fetishistic.
A guy with a PowerPoint presentation calmly explains the business case for why
his crypto-currency is valuable because it uses a state-of-the-art turbo
hashing system, but for fuck’s sake, tell
me why I should BELIEVE in it!

It’s true that this
strategy has worked to some extent for some alt-coins like Lightcoin, Quarkcoin
and Peercoin, which have gained some popularity based on design, but think
about this question: Why do you use
British Pounds or Yen? The answer to that is never, ‘because they’re well
designed’, and neither is it ‘because I rationally see how useful it is for me
to have a medium of exchange’, and neither is it ‘because I’m intimidated by
the state and they force me to use it’.

Our answer is mostly
just ‘because everyone else seems to use
it and I was taught to use it’. We are born into currencies just like we
are born into languages, and we learn to use them in a social context. If you
want to convince a person to accept ephemeral electronic records as a currency,
you need a story for people to hold on to. You need heart.

Dogecoin is a cult, and that’s how it should be

Which brings us
to Dogecoin. I can believe in Dogecoin because it gives me something to believe
in. It’s a direct appeal to irrationality, a direct appeal to transcend the
banal world of individual utility calculation and submit to something hilariously
absurd. It is, above all, a cult, and
that is infinitely more attractive than any cold appeal to robust design.

It is the
peaceful, playful gaze of the Doge itself that is the mystical foundation of
the currency. It doesn’t matter who invented it, because Dogecoin is not
experienced as a narcissistic project of a particular person, and it’s the symbol
itself that is the leader. The Doge is a figure without ego, with
cross-cultural, cross-gender, and yes, even cross-species appeal. We can all
get something from the gaze of the Shibu.

This is reflected
in the resultant community that has emerged around Dogecoin, people who refer
to themselves as ‘shibes’ and give each other gifts of Doge. While the Bitcoin subreddit has turned into a
moshpit of aggressive trolling, Dogecoin
forums feel inclusive and accepting, cohering around a surreal world of
esoteric slogans and acts of goodwill.

In closing then,
a word on design. If there has ever been any clever design in Dogecoin, it’s been in the way the core members have
focused on creating a culture from the bottom-up, rather than fetishising
currency creation as a technical solution to be marketed
from above. The Dogecoin community has grown rapidly in response to community acts
that establish a reason to believe in the currency, such as the sponsorship of underdogs
like the Jamaican bobsleigh team, and oddball stunts like backing a Nascar
racer. These are things you can sit in a pub and laugh about, outside
conference halls, and that makes all the difference.

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